October 17, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss the three ongoing stories that should be concerning for investors. New credit fraud fears raise more worries about regional banks. Investors warn on leveraged loan risks after First Brands collapse. Most Americans are falling behind in saving for retirement. The auto industry is panicking about another potential chip shortage. Oil prices drop to the lowest level in nearly five years. Delta and United are leaving other airlines behind.
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Speaker 1 (00:00):
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(00:43):
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(01:06):
and fall Lane.
Speaker 2 (01:11):
Good morning, Happy Friday.
Speaker 3 (01:12):
Welcome back to the Financial Financier, the Financial Exchange, the
old Financial.
Speaker 2 (01:18):
Exchange in one of those weeks. Welcome back to the
Financial Exchange.
Speaker 3 (01:23):
It's Mike, Paul and Tucker with you on a on
what actually before even nine thirty am started out as
a volatile day. We'll be talking about markets and the
bout of volatility we've been experiencing since last Friday. We'll
be getting into next week's big announcements that are coming up,
so taking a look at the earnings calendar for next week.
(01:45):
This week was all about the big banks. Next week
we will be kicking off some other large companies, including Netflix.
Speaker 2 (01:52):
So let's take a peek here.
Speaker 3 (01:53):
Monday, nobody ever, nobody important ever reports earnings. Sorry to
steal dynamics. Not that you're not important, but you're not
very big. Netflix reports after the bell. On Tuesday, ge
Aerospace and Coca Cola, as well as Philip Morris and
Raytheon all reporting before the bell. On Tuesday. Wednesday, we'll
(02:14):
be hearing from Tesla after the bell, IBM, SAP all
reporting after the bell, Thermo, fisher At and T reporting
before the bell, as well as ge Vernova. Remember the
g is now three separate companies, T Mobile going before
the bell on Thursday, Intel after the bell on Thursday,
(02:35):
So a few big names going out there. I think
we'll also have the CPI release what next Thursday as well,
twenty fourth twenty fourth, which is next Friday. Rather, that's
an important one one because the government's shut down. It's
the only government statistics we're going to going to be
getting until the government reopens. It also will be determining
(02:56):
helping to determine inflation adjustments for social security next year.
So one that people will be keeping an eye on,
big questions about that government shutdown and what sort of
data we will be able to get. But when we
talk about, you know, those monthly jobs reports that we
talk about thoroughly every month, the collection period for them
is mid month. So when we talk about the September
(03:19):
jobs report that was supposed to be released the first
Friday of October, the data gathering period is mid September.
Right now is the data gathering period for the October
jobs report. Nobody's working, so they can't gather the data,
Meaning even if they're back in the office on November first,
I find it unlikely that we would get to the
October jobs report. So we'll see entering now day seventeen
(03:42):
of the government shutdown, and I have to say, still
seems like very little pressure to reopen things, although you know,
what's happening behind closed doors is always an open question.
But I don't see people freaking out about TSA lines
or canceled flights or any of that stuff.
Speaker 2 (03:57):
To this point, it has not been a story we've covered.
Speaker 4 (03:59):
Yeah, when the camel's back, you know, what's the straw
that breaks the camel's back in terms of the TSA,
Like when do they I mean.
Speaker 2 (04:06):
How many days is it now? It's been seventeen just
said that. I know he wasn't listening. Important caveat it's
also October seventeenth.
Speaker 3 (04:15):
Yeah, today Chuck had to plaint this address like we
were doing all the math, and he was like, guys,
it started on October first, Now it's the thirteenth.
Speaker 2 (04:21):
That's pretty easy math. Here.
Speaker 4 (04:24):
Twenty one days's three weeks of no pay. You'd think
that that would start to.
Speaker 2 (04:30):
People.
Speaker 3 (04:30):
We'll say, yeah, I mean, we again have not seen
big impacts. I would imagine at some of the regional
airports where even one call out can really dramatically affect flights.
So you know, if you're talking about flying out of
TF Green or Manchester, I'd be interested by the way
you can text us if you do fly out of
those places six one, seven, three, six two thirteen eighty five.
But you know when we talk about the the Portsmouth
(04:53):
New Hampshire Airport or Portland Maine, or Manchester, New Hampshire,
Worcester Providence, if you're seeing so slowdowns there, I'd be
interested to hear. But out of the big guys, we
have not been hearing it, and many airline CEOs have
been saying no, hasn't been a problem yet. As far
as markets go, we've had a volatile week here. We
(05:15):
kicked off the volatility on Friday of last week over
the announcement on tariffs regarding China that was following an
announcement on rare earth restrictions from China. Since then, the
focus has shifted and I've come around to Chuck's way
of thinking here, which yes, the China tariffs were what
kicked off this market selloff, but apparently the markets seemed
(05:38):
poised for something regardless of what the announcement was because
the volatility has continued even though the concern about China
and US tariffs has dissipated. Right both presidents have said, yes,
we are still going to meet in South Korea in
a couple of weeks. The President just this morning was
saying that one hundred percent tariffs are not sustainable for
(05:59):
the long term. So there's been a lot of conciliatory remarks,
and yet markets have been bouncing all over the place.
As I mentioned in very early trading, I think this
morning around seven am you had futures off by more
than one percent. Markets have made their way back positive,
but the vix has been elevated. A lot of things are,
you know, expressing some concern about where this market has
(06:22):
gone to. I think to me, there's three categories of
news stories that are concerning investors. One is the tariff's
US China relations and rarers and everything that has to
go with it.
Speaker 2 (06:33):
Two is artificial intelligence.
Speaker 3 (06:35):
Is at the dot com bubble all over again, everyone's
making the comparisons. Three is the private credit market, and
there's three questions around that piece. It's how many loans
were taken by companies that might be over you know,
over lent to or you know, actively defrauding their lenders,
(06:57):
who issued those loans? How big are those loans that
were issued? And who now owns the repackaged loans? Because again,
what does Jeffreys or any other investment bank do when the.
Speaker 2 (07:09):
Issue of these things?
Speaker 3 (07:09):
They called them all together into a collateralized loan obligation
and sell it off to all different investors.
Speaker 2 (07:15):
So who owns it?
Speaker 3 (07:16):
And I think everybody is now searching this stuff in
a way that they weren't a few weeks ago. And
I'm just gonna go ahead and toot our own horn
for here for a moment. The first time that we
brought up this situation was all the way back on
September twenty ninth. That was the first record I have
of a email from Tucker on this subject of the
first brand's collapse and what it might mean. And immediately,
(07:38):
where did our minds go, Paul? It was, is this
the tip of the icebread, the canary, and the coal
mine of the private credit situation that has gotten so
built up over the last few years? And will you
see the spillover? To me, that's the only question that
matters right now. The other ones can take a back seat.
We won't know about the payoff on artificial intelligence for
(07:59):
several years, and so we can guess as to whether
or not it's a bubble. We can talk about that,
but until either earning start shrinking or companies start seeing
real revenue generated from the AI build out that's being
put out there, I don't think we have a firm
answer on it.
Speaker 4 (08:18):
I keep wondering, you know, how big this could be?
You know, like even if it was in massive and skill.
Speaker 2 (08:24):
How big we could be? Yeah, no, no.
Speaker 4 (08:26):
No, forgetting the private credit issues that we're talking about here,
you know, it's like it is reminiscent. I guess Chuck
Ring made this point, so I'm stealing this thunder a
little bit or copying him.
Speaker 2 (08:35):
Credit HND is that he's not here.
Speaker 4 (08:38):
The Silicon Valley banks scenario is eerily similar. We sat
here on this program and talked about if this is
bigger spread, this is problematic.
Speaker 3 (08:46):
March twenty twenty three, Silicon Valley Bank gets dragged out
over the weekend, investors get bailed out.
Speaker 2 (08:52):
You have two other banks, I think.
Speaker 4 (08:53):
It was the first public also a get.
Speaker 2 (08:57):
The same issue.
Speaker 3 (08:58):
And the question that everyone was asking themselves, is this
going to lead to a run on regional banks. Is
are there other regional banks out there who have the
same problem of duration that's going to sync them. Many
regional banks took a massive hit and.
Speaker 2 (09:16):
Lo and behold.
Speaker 3 (09:16):
A few months later we turn around and say, actually, no,
this was pretty much just a problem with those guys.
Speaker 4 (09:21):
To be fair, the federal reserves stepped in and really
back thing. If they didn't, then who knows what would
have happened. That was to credit them. That was a
tremendous move to really stem the tize. And it's a
different situation here when you're deal with private credit markets.
But even if this spills over to regional banks, not
to be so biased like the S and P five hundred,
(09:42):
but it is so much of what we deal with
on a daily basis and in client investment portfolios. Like
many individual investors listening to this program have likely very
limited exposure to regional banks within their portfolio.
Speaker 2 (09:55):
So let's take a quick break.
Speaker 3 (09:56):
When we come back, I want to continue this conversation
because to me, the volatility we've seen around insurers and
regional banks, which we will talk about, is not the
biggest story when it comes to all of this. So
let's say quick break and more talk on private credit,
who owns it, where investors are sniffing out the rot,
(10:16):
and what it might mean next on the Financial Exchange.
Speaker 1 (10:19):
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Speaker 3 (11:24):
All right, so let's go back to this First Brand
story because it has been pretty intriguing. Tricolor has as well,
But I want to talk about the fraud that's being
alleged by First Brands, which is effectively all different types
of lending that they were doing. And it's tough to
say exactly where the fraud is occurring, but even those
(11:44):
who are running the bankruptcy have been asked like, can
you account for this money that's supposed to be on
the balance sheet and the answer has been no, And
so there's some more shoes to drop on there. There
are some difficult questions being asked, especially of Jeffreys, who
originated a lot of this.
Speaker 2 (11:59):
Lens for a few different reasons.
Speaker 3 (12:02):
One because they were making these traditional loans to them
and they were also on the other side of their
business helping out with the vendor financing. And that seems
to be the piece that a lot of people missed here,
was that, oh, yeah, you're taking out these traditional loans
and look at this great business model, but you have
all these kind of hidden vendor financing deals going on
(12:24):
in the back round two, which leads to a lot
more debt than was publicly known, and the Wall Street Journal,
at least, you know, put together a piece showing how
Jeffries had exposure to both of those sides through different
units of their bank. And again the question on Jeffries
is if anyone should have known, shouldn't have been you guys.
So again they've pulled some investor presentations where Jeffries, for example,
(12:49):
estimated the total debt to be around five billion.
Speaker 2 (12:51):
We know that it's now approximately double that.
Speaker 3 (12:55):
So big questions there again, allegations of fraud and just
some curiosities here with this bankruptcy. So then the next
question was, okay, Jeffries, you had a big hand in
originating this. Now who owns all this stuff that you
packaged together and sold? And the answer seems.
Speaker 2 (13:14):
To be ubs and a few even JP Morgan had
know JP Morgan was just tricolor, Just tricolor. Yeah, so a.
Speaker 3 (13:23):
Few big banks, but largely also some smaller banks and
insurance companies. Yesterday, the regional banking index sold off by
about six percent.
Speaker 2 (13:32):
I haven't looked today.
Speaker 3 (13:33):
The insurance sector index dropped by about three percent on
this news. In particular a few regional banks that again,
unless you bank with them, raise your hand. If you're
familiar with Zion's Bank Corp. Or Western Alliance, Yeah, only
because you don't probably know them a whole lot, and
(13:55):
you know, taking a look at this stuff, they're preferred shares.
Both of these banks had some of the worst days
since April of twenty twenty four on this sort of news. So, Paul,
you asked an intriguing question to me, which is okay, cool, Mike, interesting,
but dark?
Speaker 2 (14:13):
Right right? Who gives it?
Speaker 3 (14:15):
Because unless you are a real active investor who's out
there picking individual regional banks.
Speaker 2 (14:22):
Should you care?
Speaker 3 (14:23):
It's it's not moving markets today in the negative, and
you know, none of these things even make it into
the top ten of any of the indices. And I
come at it from a different perspective. If this is isolated,
if it's concentrated in a couple companies that you know
perpetuated fraud, then it's probably not a problem, yep. If instead,
(14:47):
what this causes is every investment bank and private lender
to go out there and take a good hard look
at their loans and start asking tougher questions of their borrowers,
and it turns out that they're something more systemic here.
Then what that will ultimately lead to is all of
these lenders pulling way back on lending. Sure, and one
(15:09):
of the key funding sources for the biggest thing that
has mattered to markets this year artificial intelligence, it's private
credit lenders. They've been lending and investing approximately fifty billion
dollars a month into all sorts of different areas of
artificial intelligence build out, and so without that cash flow,
(15:32):
to me, there's some big questions about what this market
can actually stand upon.
Speaker 2 (15:36):
Yes, Google is still.
Speaker 3 (15:38):
Going to be pouring their money into there, but again,
even a marginal drop in investment on these different areas
I think could lead to some pretty dramatic effects.
Speaker 2 (15:47):
So that's where I care about this.
Speaker 3 (15:50):
I do care about the regional banks too, and I
don't want to see a bunch of go under that
can be pretty systemic. But I think honestly, the comparison
that you were making before of two years ago, Paul,
with Silicon Valley Bank is probably the appropriate one, which
is to say, we don't know if this is isolated
or systemic. There's probably not an easy way for the
(16:10):
FED to step in and quash it because of the
type of lending that this is they don't oversee private credit.
Speaker 2 (16:17):
It's not banking.
Speaker 3 (16:18):
It's really not an area that they are into, and
so we need time to figure out is this isolated
or is it systemic. But when you have two failures
this close together in a related industry, I start to
ask questions.
Speaker 4 (16:33):
I'm going to rebuttal your sentiment a little bit in
that I get the further trickle down of impacts from
this credit issue could become problematic. And here's why you
made the key point with it could cause scrutiny on
these companies to lend less often than they were previously,
which was at an absolute rampant pace. But I wouldn't
(16:55):
have it snowball all the way I'm going to call
it up to some of the major tech hyper scalers
is in terms of that's the type of financing that
they would pull away from.
Speaker 2 (17:04):
I think where the problem.
Speaker 4 (17:05):
Could in lie is that they may pull away from
the financing that so much of the small to mid
market businesses in this country rely on for financing, and
that would have a detrimental impact to those And that's
why not to say I don't care, because that is important.
We talked about on the show the other day, where
you know, small business employee half this country and a
(17:26):
significant percentage of the lending for these businesses comes from
this private credit area. So that's important. But then again,
from an individual stock ownership standpoint, for the retiree out
there in their four one K, they probably don't have exposure.
I think it would be more of a macroeconomic concern
that I would have that all of a sudden, small
and mid sized businesses that are already getting beaten up
(17:47):
by all the tariffs that are in place year to
date also have difficulty getting as much lending. Rather than
taking your worst case scenario of oh, all of a sudden,
you know Oracle or whomever, Maybe not them for the
hyper skills, maybe Core weave something down the chain a
little bit, don't get their financing.
Speaker 2 (18:04):
For the AI build out.
Speaker 4 (18:05):
Yeah, it's an interesting discussion and thought exercise to have.
Speaker 3 (18:09):
Yeah, we will see where the spillover is. But clearly,
you know investors over the last couple of days sniffing
out a few areas. One is regional banks, two is insurers,
And again why they have this exposure is pretty simple.
I mean, both of these institutions take in a boatload
of cash from their customers and then have all sorts
of potential liabilities to pay out. And so how if
(18:31):
you're taking you know, fifteen hundred dollars insurance premium from
the Lane family on their auto policies, you can take it.
You can invest it at the FED and get some interest.
You can go buy treasuries and get some interest. Or
if you can convince your board and your shareholders, you
can go buy a basket of you know, collaboralize loan obligations,
juice your return and boost your profits, and or offer
(18:56):
a lower premium to your customers. Charlie perfect on all
fronts until it blows up in your face.
Speaker 4 (19:02):
Charlie Munger has this quote that smart man go broke
from Ladies liquor and leverage and the leverage one.
Speaker 2 (19:07):
It's like, how often does this come up?
Speaker 4 (19:09):
Mike? This is clos. We did this before with cmos
and it's like the package of stuff. It's so eerily
reminiscent how history repeats itself where you get over your
skis and overbar and overextend and something blows up.
Speaker 2 (19:21):
That is the business cycle.
Speaker 3 (19:22):
Paul quick Break, Wall Street Watch coming up next.
Speaker 1 (19:40):
Like US on Facebook and follow us on Twitter at
TFFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
It's been a bumpy ride for markets to this point,
as investors way regional bank concerns. This comes after Zion's
ban Corps said it would take a large loss, accusing
some borrowers of fraud. Right now, the Dow is up
by about a quarter percent, or one hundred and twenty
six points. SMP five hundred is up a tenth of
(20:20):
a percent or eight points higher. NASDAK up a tenth
of a percent or twenty two points higher. Russell two
thousand is down about three tenths of one percent. Tenure
treasure yield is up four basis points at four point
zero one six percent, and crude oil mostly flat tipping lower,
trading a fifty seven dollars and thirty eight cents a barrel,
(20:41):
well after yesterday's ten percent plunge. Shares in Jeffries bouncing
back six percent today. The bank has recently faced questions
about its ties to the First Brand's bankruptcy. However, Oppenheimer
upgraded the stock to outperform, with firm said Jeffrey's exposure
to first brands is very limited. Meanwhile, another big financial name,
(21:02):
and American Express, beat third quarter expectations and raised its
full year guidance. The credit card company reported a jump
in profit and revenue where card holders spent more in
card fees grew. AMEX shares a rising almost five percent, Elsewhere,
shares in ozempic maker Novo Nordisk falling over three percent
(21:23):
after President Trump said the cost of the weight loss
drug could be one hundred and fifty dollars, or much
lower than it is now. Micron Technology down by about
one percent after Reuters reported that the chip maker would
exit the server chips business in China. Railroad operator CSX
is up two percent after it posted better than expected
(21:45):
third quarter earnings. In Oracle stock pulling back after yesterday's
rally by six percent today. Yesterday, Oracle confirmed a cloud
computing deal with Meta. I'm Tucker Silva, and that is
Wall Street Watch pull.
Speaker 3 (22:00):
Most Americans are falling behind and saving for retirement. I've
heard this story again before. But you do financial planning,
I would guess every day just about.
Speaker 2 (22:14):
So.
Speaker 3 (22:15):
You and I have both run into instances where we
are working with somebody on their financial plan and they're
approaching retirement and things don't work. So we always have
a bunch of levers to pull. What are the levers
that you pull if you are falling behind on putting
things together for retirement?
Speaker 2 (22:31):
One in for that bucket.
Speaker 4 (22:32):
One which is not the most appealing is you know,
you continue to work longer than you would have wanted to,
which isn't the first one that you want to start with.
Speaker 2 (22:39):
It's always a tough pill to swallow. Yeah, it is.
Speaker 3 (22:41):
Yeah.
Speaker 4 (22:41):
Otherwise, there are some instances where I'm working with clients
particularly what's so important about this is doing it before
it becomes an issue. You can kind of make the
parallel to Social Security trust, which is mentioned in this article.
It's you know, projected around on twenty thirty three. Gee,
it would be so smart if we took measures today
to try and you know, curb that potent issue. That's
a separate deal. We all know about that, but specific
(23:03):
to an individual out there, The sooner that you address
that shortfall, the easier it is to potentially resolve that
issue rather than saying, Gee, I'm sixty four or sixty
five years old, it's time to pony up and save more.
What oftentimes I'll look at with clients is, let's say
you get past the college tuition years for your kids
and you're starting to phase in, to call it your
(23:23):
late fifties early sixties. That is that point in time
where you can really turn on the saving switch. For
a lot of people. You're at the peak of your
earnings power from an income perspective, you don't have the
big liability of a tuition payment. That's the time to
start a gear up and get ready to go.
Speaker 2 (23:38):
Yeah, I'll be honest.
Speaker 3 (23:39):
Like the working extra and cutting expenses piece, they're the
most impactful ones you can do, but they are also
the toughest ones to get.
Speaker 2 (23:49):
Yeah, buy into.
Speaker 4 (23:50):
Thirty years of working your butt off for forty years
and then you have to cut expenses.
Speaker 3 (23:54):
You know, the one that gets underestimated. In my mind,
we're oftentimes talking to people who have been in stressful,
high power jobs for a long period of time, but
pulling off a few years of working for even a
third of what that person was pulling in before in
a very low.
Speaker 2 (24:11):
Stress type environment. It has a lot of impact it does.
Speaker 3 (24:16):
You know, That's one where I think people sometimes undervalue or,
as the author of this piece is puts in there,
there might be some embarrassment or shame in doing that.
Speaker 2 (24:25):
Type of work.
Speaker 3 (24:26):
And I guess I've seen it, and I'm not here
to judge psychology, but like I know people who have
gone from you know, working in a six figure job
to working part time at home depot and one really
enjoy the work a fair bit, and then two have
this bucket of money that they pull in that really
dephrase the need for so security or other things that
they're able to put off for longer. But I think,
(24:50):
as we frequently come back to from the Armstrong Advisory
Group on all of this, it's about knowing, Like that's
the first step in the process, because if you don't
know how much you can afford to spend or how
much you need to save every year to get to
a comfortable place, then it's all kind of a moot point, right.
You can't make these goals and objectives without having some
(25:12):
semblance an idea of how much you need to get to.
Speaker 4 (25:15):
Yeah, or where what is your baseline? I can't tell you,
Mike and you probably see the same thing. How many
people have no idea what they spend on a monthly basis.
I would say upwards of seventy or eighty percent of
people we meet with initially don't have an idea what
their baseline is.
Speaker 3 (25:29):
Right, So these are important considerations, and the fact of
the matter is, you know, you might have a really
firm grasp on the budget, you might have a really
firm grasp on the investment strategy and portfolio and what
your returns have been. Ultimately, though, to make your financial
plan successful, you have to have a sense for where
are you trying to get to and what it's going
(25:50):
to take to get there. How much can I spend,
how much do I need to make, how long do
I need to work? And what is my real number,
like what number do I need to get to before
I can comfortably hang it up? And it's different for
every household. If you're trying to answer that question, that
is what we do at the Armstrong Advisor Group day
in and day out, is help people assess what that
(26:11):
magic number is going to be to make their plans
work in retirement. Give us a call at eight hundred
three nine three for zero zero one. Let us talk
to you about how we do it. At the Armstrong
Advisory Group offices all throughout New England. You can book
an appointment or schedule a call by calling eight hundred
three nine three for zero zero one, or schedule a
(26:32):
call back at Armstrong Advisory dot com.
Speaker 1 (26:35):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 3 (26:50):
All right, we got one out of left field here, Paul.
I didn't think we were going to be talking about
this issue today, but auto industry panic about panicking about
another chip shortage. I thought that we were done with
chips shortages for the auto sector at least, but back
at the forefront, potentially here I was much more nervous
about tariffs and bankruptcies are parts suppliers. But now we
(27:11):
are back into the story of chip shortages for major
auto companies.
Speaker 2 (27:17):
Why are we talking about this today?
Speaker 4 (27:19):
The enjoying part of our job, MIC is it's something
new every day. Earlier this week, Chuck and I were
talking about cooking oil and soybean issues between China and
the US, and here we are back with the chip issues.
But what we're dealing with specifically here is Nexspiia, which
is a Dutch chip maker with about forty percent market
share and basic automotive chips. Their shipments have been halted
(27:42):
because the Dutch government took it over from its Chinese owner.
So basically, there was this company out there called Wintech Technology,
a Chinese company which is on the US trade blacklist.
The Dutch government came in and seized Nexspira, which is
kind of underneath that Wintech Technology, and took it back
over stating that it has to keep Europe from losing
(28:05):
its technological capabilities and its knowledge there. It deals with
some of the issues that have gone on with concerns
about exporting. You know, it bleeds into some of the
rare earth stuff that we've talked about too, where China
had stepped in and said, all right, you know what,
we're going to see some of these exports as a
result of this takeover.
Speaker 1 (28:26):
That they did.
Speaker 2 (28:27):
Raise your hand if you've ever heard of Nexperia before
to day, right.
Speaker 3 (28:34):
This is how sensitive these supply chains still are. There's
some Dutch company that no one here has ever heard
of that accounts for forty percent market share, and basic.
Speaker 2 (28:44):
Auto chips who knew? Who knew?
Speaker 3 (28:48):
Let's take a quick break when we come back. I
think that's enough for the auto industry for the moment.
Let's talk a little bit about oil because prices have
been on the move. A little bit of good news
for those of us at the pump. But what does
it mean for the overall economy?
Speaker 2 (29:03):
That's next. On the Financial Exchange.
Speaker 1 (29:05):
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(29:28):
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Speaker 2 (29:50):
Paul, it's still pretty cheap to fill up my cars.
Speaker 3 (29:52):
It's a national average of three dollars and five cents
a gallon. Looking across New England, here ains at three
oh three, New Hampshire at two ninety six, Mass at
three oh two, Connecticut at three yoh seven, Rhode Island
at two ninety six, and Vermont sitting at three dollars
and fourteen cents per gallond. Did I give, Yeah, I
(30:15):
give Connecticut. So loving the cheap gas prices, I'm excited to,
you know, pay a little bit less for home heating
oil this winter. But I I don't know, I'm a
little bit perked up about oil prices dropping below sixty
bucks a barrel. I mean, we're sitting right now, just
(30:36):
a FYI at fifty seven dollars thirty nine cents on
West Texas crude oil. Most analysts out there, and most
who look closely at the oil industry look at that
sixty dollars range as kind of the break even point
for drilling new wells and getting oil on the ground
in the United States.
Speaker 2 (30:55):
And so.
Speaker 3 (30:57):
You do wonder, okay, how much new exploration and drilling
is going to happen with oil sitting at these prices.
But moreover, what does it say about the global economy
to see oil prices sitting in the sixty dollars range.
To me, it doesn't spell fantastic news about you know,
if you have oil demand so low that it's only
able to garner fifty seven bucks a barrel, I don't know.
(31:20):
I'm not enthusiastic about what this might mean.
Speaker 4 (31:23):
Yeah, and it seems like this could potentially there isn't
really a near term fix for this. I mean, US
oil producers they notched a fresh output record of more
than thirteen and a half million barrels a day in July.
You've got the Saudi leg lead OPEC announcing that they're
going to boost production by one hundred and thirty seven
thousand barrels a day in November. So it seems like you.
Speaker 3 (31:43):
Got the massive oil fielding Guiana. Now that's pumping. So,
I mean, don't get me wrong, it's not only a
demand equation here. We do have more supply that's able
to be pumped.
Speaker 2 (31:54):
But yeah, to see see oil prices down here, I
don't know. To me.
Speaker 3 (32:01):
That industrial demand and all that stuff is not terribly
great at the moment.
Speaker 4 (32:07):
Probably the case, but it's with energy productions. It's just
the price can swing so quickly. Yes, it's hard to
read too much into it, but I would agree with you.
It does seem like industrial activities down a bit, and
maybe that's leading to some of these lower prices here.
Speaker 3 (32:19):
New York Times reporting that Delta and United are leaving
other airlines behind. So let's talk about how and why
and will it stick? I mean, the airline industry has
obviously become hyper concentrated at this point, in spite of
in spite of a few judges shooting down merger attempts.
(32:40):
What was it Jet Blue and Spirit that tried to
merge and now Spirits of course in bankruptcy, and who
knows what will happen with Jet Blue, but these two
are clearly standing out. I would toss American as kind
of a third contender in here as well, because they
basically mirror each other's business models. But what's been working
recently for these airlines compared to us.
Speaker 4 (33:00):
Really what it is is this shift to focus on
making the most profit per seat on the first class
and lounge premium seats experience. And I hate to keep
bringing this up. We hit it on often. I do
wonder if it's just focusing on the divergence and the
consumer that we've kind of tracked where the higher income
(33:21):
consumers are accounting for a heavy percentage of spending nationally.
And it seems like Delta and some of these in
American have been these airlines that have and United too
that have sort of shown this trend the most where
whether it's corporate business travel or first class seats, that
is where they're making tremendous margins MIC and it's leading
to profitability numbers that are really impressive for the airline sector,
(33:45):
which is a very tough business to execute in. And
it just seems like there's the haves and haves nots
both of airlines and just where the consumers are willing
to spend money. Like I just don't think you're seeing
as much demand for those discount airlines in those travelers
than you are from the first class travelers in Delta.
Speaker 2 (34:05):
United. Look.
Speaker 3 (34:06):
Airline travel is the It's probably my definition of discretionary item.
Yeah right, Like even for businesses, you do not have
to send your employees to go on an airline.
Speaker 2 (34:18):
You can tell them to do a zoom meeting. These days, it.
Speaker 3 (34:21):
Is the definition of discretionary spending is flights on airlines.
And so I do find what is happening there to
be intriguing, and it continues. Like you said, this divergence
we have been seeing of luxury right.
Speaker 2 (34:39):
Now is selling.
Speaker 3 (34:40):
Delta in their most recent earnings call, reported that premium
revenue increased by nine percent year over year. So that
is first class, is business class, it's you know, just
premium spending.
Speaker 2 (34:51):
In general.
Speaker 3 (34:53):
Main ticket revenue, main cabin ticket revenue was down four
percent year over year at Delta. Right that is a
star contrast. It spells right into what we've been talking
about of the top ten percent really keeping on the
spending and the others not doing so. And in some
ways it makes me think.
Speaker 2 (35:11):
You know, hey, will we see.
Speaker 3 (35:15):
Will we see that dramatically pull back if you see
an asset price pull back, and will the spirits and
the jet blues in the Southwest have their heyday at
that point? But I'm honestly not sure at this stage
because Delta and American and all these airlines have gotten
so good at segmenting their business and still offering really
cheap flights in their main cabins. You know, I don't
(35:39):
know if Delta does it, but American, I'm sure, has
a completely stripped down ticket where you don't get to
choose your seat, don't get to bring on a checked
bag and everything, And so they can compete on price
with spirit in ways that they just chose not to
in the past. And so even the case of let's say,
you know, markets fall apart and we have that per
(36:00):
of time where luxury spending pulls back, I'm just not
sure that the business is going to go to those
discounters like it used to.
Speaker 4 (36:07):
Yeah, just such a difficult business to execute it. And
I do worry about, like you said, it is such
discretionary spending that it could fade very quickly to from
these larger aircraft carriers that they don't continue to demand
these type of profits on those seats. But I don't
know how how would you make a counter argument that
(36:28):
the mid size airlines can really compete. I just don't
know what case stuff to make.
Speaker 3 (36:34):
Yeah, it's tough to By the way, this is not
just something that's isolated to the airline industry. Marriott also
reported earnings recently. What they found was their luxury segment
saw growth of four point one percent in the US
and Canada, where as their Select service and extended stay
so they're more discounted segment one and a half percent decline.
Speaker 2 (36:58):
So you're really seeing this.
Speaker 3 (37:00):
Across the board. And here's where I'll drive it all home.
Consumer spending generally used to be driven by wages. It
was driven by the wage that you have in your
current job, as well as new people getting jobs and
getting into the labor force, and that was what drove
consumer spending. There's this insinuation by this data that now
(37:23):
consumer spending is being driven by a wealthier, older population
who I would presume is more being driven by asset
prices and the wealth effect than they are by wages,
because I don't know a ton of seventy year olds
who are working. It's mainly, hey, I've got so security,
(37:43):
and look how big my portfolio has gotten. And I
went on zillo and look what my house is worth.
And that just reshapes things pretty dramatically. It just changes incentives.
It changes a whole lot of the structure of the
US economy. If consumerism is now still there but driven
by asset prices instead of income, I kind of have
(38:05):
to rethink a lot of things in my head about
how this whole structure works. We got to take a
quick break, but have a ton more to cover in
the second hour of the Financial Exchange.
Speaker 2 (38:13):
Stay tuned, we'll be right back folks.
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(01:06):
and fall Lane.
Speaker 2 (01:11):
Good morning, Happy Friday.
Speaker 3 (01:12):
Welcome back to the Financial Financier, the Financial Exchange, the
old Financial.
Speaker 2 (01:18):
Exchange in one of those weeks. Welcome back to the
Financial Exchange.
Speaker 3 (01:23):
It's Mike, Paul and Tucker with you on a on
what actually before even nine thirty am started out as
a volatile day. We'll be talking about markets and the
bout of volatility we've been experiencing since last Friday. We'll
be getting into next week's big announcements that are coming up,
so taking a look at the earnings calendar for next week.
(01:45):
This week was all about the big banks. Next week
we will be kicking off some other large companies, including Netflix.
Speaker 2 (01:52):
So let's take a peek here.
Speaker 3 (01:53):
Monday, nobody ever, nobody important ever reports earnings. Sorry to
steal dynamics. Not that you're not important, but you're not
very big. Netflix reports after the bell. On Tuesday, ge
Aerospace and Coca Cola, as well as Philip Morris and
Raytheon all reporting before the bell. On Tuesday. Wednesday, we'll
(02:14):
be hearing from Tesla after the bell, IBM, SAP all
reporting after the bell, Thermo, fisher At and T reporting
before the bell, as well as ge Vernova. Remember the
g is now three separate companies, T Mobile going before
the bell on Thursday, Intel after the bell on Thursday,
(02:35):
So a few big names going out there. I think
we'll also have the CPI release what next Thursday as well,
twenty fourth twenty fourth, which is next Friday. Rather, that's
an important one one because the government's shut down. It's
the only government statistics we're going to going to be
getting until the government reopens. It also will be determining
(02:56):
helping to determine inflation adjustments for social security next year.
So one that people will be keeping an eye on,
big questions about that government shutdown and what sort of
data we will be able to get. But when we
talk about, you know, those monthly jobs reports that we
talk about thoroughly every month, the collection period for them
is mid month. So when we talk about the September
(03:19):
jobs report that was supposed to be released the first
Friday of October, the data gathering period is mid September.
Right now is the data gathering period for the October
jobs report. Nobody's working, so they can't gather the data,
Meaning even if they're back in the office on November first,
I find it unlikely that we would get to the
October jobs report. So we'll see entering now day seventeen
(03:42):
of the government shutdown, and I have to say, still
seems like very little pressure to reopen things, although you know,
what's happening behind closed doors is always an open question.
But I don't see people freaking out about TSA lines
or canceled flights or any of that stuff.
Speaker 2 (03:57):
To this point, it has not been a story we've covered.
Speaker 4 (03:59):
Yeah, when the camel's back, you know, what's the straw
that breaks the camel's back in terms of the TSA,
Like when do they I mean.
Speaker 2 (04:06):
How many days is it now? It's been seventeen just
said that. I know he wasn't listening. Important caveat it's
also October seventeenth.
Speaker 3 (04:15):
Yeah, today Chuck had to plaint this address like we
were doing all the math, and he was like, guys,
it started on October first, Now it's the thirteenth.
Speaker 2 (04:21):
That's pretty easy math. Here.
Speaker 4 (04:24):
Twenty one days's three weeks of no pay. You'd think
that that would start to.
Speaker 2 (04:30):
People.
Speaker 3 (04:30):
We'll say, yeah, I mean, we again have not seen
big impacts. I would imagine at some of the regional
airports where even one call out can really dramatically affect flights.
So you know, if you're talking about flying out of
TF Green or Manchester, I'd be interested by the way
you can text us if you do fly out of
those places six one, seven, three, six two thirteen eighty five.
But you know when we talk about the the Portsmouth
(04:53):
New Hampshire Airport or Portland Maine, or Manchester, New Hampshire,
Worcester Providence, if you're seeing so slowdowns there, I'd be
interested to hear. But out of the big guys, we
have not been hearing it, and many airline CEOs have
been saying no, hasn't been a problem yet. As far
as markets go, we've had a volatile week here. We
(05:15):
kicked off the volatility on Friday of last week over
the announcement on tariffs regarding China that was following an
announcement on rare earth restrictions from China. Since then, the
focus has shifted and I've come around to Chuck's way
of thinking here, which yes, the China tariffs were what
kicked off this market selloff, but apparently the markets seemed
(05:38):
poised for something regardless of what the announcement was because
the volatility has continued even though the concern about China
and US tariffs has dissipated. Right both presidents have said, yes,
we are still going to meet in South Korea in
a couple of weeks. The President just this morning was
saying that one hundred percent tariffs are not sustainable for
(05:59):
the long term. So there's been a lot of conciliatory remarks,
and yet markets have been bouncing all over the place.
As I mentioned in very early trading, I think this
morning around seven am you had futures off by more
than one percent. Markets have made their way back positive,
but the vix has been elevated. A lot of things are,
you know, expressing some concern about where this market has
(06:22):
gone to. I think to me, there's three categories of
news stories that are concerning investors. One is the tariff's
US China relations and rarers and everything that has to
go with it.
Speaker 2 (06:33):
Two is artificial intelligence.
Speaker 3 (06:35):
Is at the dot com bubble all over again, everyone's
making the comparisons. Three is the private credit market, and
there's three questions around that piece. It's how many loans
were taken by companies that might be over you know,
over lent to or you know, actively defrauding their lenders,
(06:57):
who issued those loans? How big are those loans that
were issued? And who now owns the repackaged loans? Because again,
what does Jeffreys or any other investment bank do when the.
Speaker 2 (07:09):
Issue of these things?
Speaker 3 (07:09):
They called them all together into a collateralized loan obligation
and sell it off to all different investors.
Speaker 2 (07:15):
So who owns it?
Speaker 3 (07:16):
And I think everybody is now searching this stuff in
a way that they weren't a few weeks ago. And
I'm just gonna go ahead and toot our own horn
for here for a moment. The first time that we
brought up this situation was all the way back on
September twenty ninth. That was the first record I have
of a email from Tucker on this subject of the
first brand's collapse and what it might mean. And immediately,
(07:38):
where did our minds go, Paul? It was, is this
the tip of the icebread, the canary, and the coal
mine of the private credit situation that has gotten so
built up over the last few years? And will you
see the spillover? To me, that's the only question that
matters right now. The other ones can take a back seat.
We won't know about the payoff on artificial intelligence for
(07:59):
several years, and so we can guess as to whether
or not it's a bubble. We can talk about that,
but until either earning start shrinking or companies start seeing
real revenue generated from the AI build out that's being
put out there, I don't think we have a firm
answer on it.
Speaker 4 (08:18):
I keep wondering, you know, how big this could be?
You know, like even if it was in massive and skill.
Speaker 2 (08:24):
How big we could be? Yeah, no, no.
Speaker 4 (08:26):
No, forgetting the private credit issues that we're talking about here,
you know, it's like it is reminiscent. I guess Chuck
Ring made this point, so I'm stealing this thunder a
little bit or copying him.
Speaker 2 (08:35):
Credit HND is that he's not here.
Speaker 4 (08:38):
The Silicon Valley banks scenario is eerily similar. We sat
here on this program and talked about if this is
bigger spread, this is problematic.
Speaker 3 (08:46):
March twenty twenty three, Silicon Valley Bank gets dragged out
over the weekend, investors get bailed out.
Speaker 2 (08:52):
You have two other banks, I think.
Speaker 4 (08:53):
It was the first public also a get.
Speaker 2 (08:57):
The same issue.
Speaker 3 (08:58):
And the question that everyone was asking themselves, is this
going to lead to a run on regional banks. Is
are there other regional banks out there who have the
same problem of duration that's going to sync them. Many
regional banks took a massive hit and.
Speaker 2 (09:16):
Lo and behold.
Speaker 3 (09:16):
A few months later we turn around and say, actually, no,
this was pretty much just a problem with those guys.
Speaker 4 (09:21):
To be fair, the federal reserves stepped in and really
back thing. If they didn't, then who knows what would
have happened. That was to credit them. That was a
tremendous move to really stem the tize. And it's a
different situation here when you're deal with private credit markets.
But even if this spills over to regional banks, not
to be so biased like the S and P five hundred,
(09:42):
but it is so much of what we deal with
on a daily basis and in client investment portfolios. Like
many individual investors listening to this program have likely very
limited exposure to regional banks within their portfolio.
Speaker 2 (09:55):
So let's take a quick break.
Speaker 3 (09:56):
When we come back, I want to continue this conversation
because to me, the volatility we've seen around insurers and
regional banks, which we will talk about, is not the
biggest story when it comes to all of this. So
let's say quick break and more talk on private credit,
who owns it, where investors are sniffing out the rot,
(10:16):
and what it might mean next on the Financial Exchange.
Speaker 1 (10:19):
Thanks to US six one, seven, three, six, two thirteen
eighty five with your comments and questions about today's show,
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network.
Find daily interviews in full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
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(10:42):
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Speaker 5 (10:49):
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Speaker 3 (11:24):
All right, so let's go back to this First Brand
story because it has been pretty intriguing. Tricolor has as well,
But I want to talk about the fraud that's being
alleged by First Brands, which is effectively all different types
of lending that they were doing. And it's tough to
say exactly where the fraud is occurring, but even those
(11:44):
who are running the bankruptcy have been asked like, can
you account for this money that's supposed to be on
the balance sheet and the answer has been no, And
so there's some more shoes to drop on there. There
are some difficult questions being asked, especially of Jeffreys, who
originated a lot of this.
Speaker 2 (11:59):
Lens for a few different reasons.
Speaker 3 (12:02):
One because they were making these traditional loans to them
and they were also on the other side of their
business helping out with the vendor financing. And that seems
to be the piece that a lot of people missed here,
was that, oh, yeah, you're taking out these traditional loans
and look at this great business model, but you have
all these kind of hidden vendor financing deals going on
(12:24):
in the back round two, which leads to a lot
more debt than was publicly known, and the Wall Street Journal,
at least, you know, put together a piece showing how
Jeffries had exposure to both of those sides through different
units of their bank. And again the question on Jeffries
is if anyone should have known, shouldn't have been you guys.
So again they've pulled some investor presentations where Jeffries, for example,
(12:49):
estimated the total debt to be around five billion.
Speaker 2 (12:51):
We know that it's now approximately double that.
Speaker 3 (12:55):
So big questions there again, allegations of fraud and just
some curiosities here with this bankruptcy. So then the next
question was, okay, Jeffries, you had a big hand in
originating this. Now who owns all this stuff that you
packaged together and sold? And the answer seems.
Speaker 2 (13:14):
To be ubs and a few even JP Morgan had
know JP Morgan was just tricolor, Just tricolor. Yeah, so a.
Speaker 3 (13:23):
Few big banks, but largely also some smaller banks and
insurance companies. Yesterday, the regional banking index sold off by
about six percent.
Speaker 2 (13:32):
I haven't looked today.
Speaker 3 (13:33):
The insurance sector index dropped by about three percent on
this news. In particular a few regional banks that again,
unless you bank with them, raise your hand. If you're
familiar with Zion's Bank Corp. Or Western Alliance, Yeah, only
because you don't probably know them a whole lot, and
(13:55):
you know, taking a look at this stuff, they're preferred shares.
Both of these banks had some of the worst days
since April of twenty twenty four on this sort of news. So, Paul,
you asked an intriguing question to me, which is okay, cool, Mike, interesting,
but dark?
Speaker 2 (14:13):
Right right? Who gives it?
Speaker 3 (14:15):
Because unless you are a real active investor who's out
there picking individual regional banks.
Speaker 2 (14:22):
Should you care?
Speaker 3 (14:23):
It's it's not moving markets today in the negative, and
you know, none of these things even make it into
the top ten of any of the indices. And I
come at it from a different perspective. If this is isolated,
if it's concentrated in a couple companies that you know
perpetuated fraud, then it's probably not a problem, yep. If instead,
(14:47):
what this causes is every investment bank and private lender
to go out there and take a good hard look
at their loans and start asking tougher questions of their borrowers,
and it turns out that they're something more systemic here.
Then what that will ultimately lead to is all of
these lenders pulling way back on lending. Sure, and one
(15:09):
of the key funding sources for the biggest thing that
has mattered to markets this year artificial intelligence, it's private
credit lenders. They've been lending and investing approximately fifty billion
dollars a month into all sorts of different areas of
artificial intelligence build out, and so without that cash flow,
(15:32):
to me, there's some big questions about what this market
can actually stand upon.
Speaker 2 (15:36):
Yes, Google is still.
Speaker 3 (15:38):
Going to be pouring their money into there, but again,
even a marginal drop in investment on these different areas
I think could lead to some pretty dramatic effects.
Speaker 2 (15:47):
So that's where I care about this.
Speaker 3 (15:50):
I do care about the regional banks too, and I
don't want to see a bunch of go under that
can be pretty systemic. But I think honestly, the comparison
that you were making before of two years ago, Paul,
with Silicon Valley Bank is probably the appropriate one, which
is to say, we don't know if this is isolated
or systemic. There's probably not an easy way for the
(16:10):
FED to step in and quash it because of the
type of lending that this is they don't oversee private credit.
Speaker 2 (16:17):
It's not banking.
Speaker 3 (16:18):
It's really not an area that they are into, and
so we need time to figure out is this isolated
or is it systemic. But when you have two failures
this close together in a related industry, I start to
ask questions.
Speaker 4 (16:33):
I'm going to rebuttal your sentiment a little bit in
that I get the further trickle down of impacts from
this credit issue could become problematic. And here's why you
made the key point with it could cause scrutiny on
these companies to lend less often than they were previously,
which was at an absolute rampant pace. But I wouldn't
(16:55):
have it snowball all the way I'm going to call
it up to some of the major tech hyper scalers
is in terms of that's the type of financing that
they would pull away from.
Speaker 2 (17:04):
I think where the problem.
Speaker 4 (17:05):
Could in lie is that they may pull away from
the financing that so much of the small to mid
market businesses in this country rely on for financing, and
that would have a detrimental impact to those And that's
why not to say I don't care, because that is important.
We talked about on the show the other day, where
you know, small business employee half this country and a
(17:26):
significant percentage of the lending for these businesses comes from
this private credit area. So that's important. But then again,
from an individual stock ownership standpoint, for the retiree out
there in their four one K, they probably don't have exposure.
I think it would be more of a macroeconomic concern
that I would have that all of a sudden, small
and mid sized businesses that are already getting beaten up
(17:47):
by all the tariffs that are in place year to
date also have difficulty getting as much lending. Rather than
taking your worst case scenario of oh, all of a sudden,
you know Oracle or whomever, Maybe not them for the
hyper skills, maybe Core weave something down the chain a
little bit, don't get their financing.
Speaker 2 (18:04):
For the AI build out.
Speaker 4 (18:05):
Yeah, it's an interesting discussion and thought exercise to have.
Speaker 3 (18:09):
Yeah, we will see where the spillover is. But clearly,
you know investors over the last couple of days sniffing
out a few areas. One is regional banks, two is insurers,
And again why they have this exposure is pretty simple.
I mean, both of these institutions take in a boatload
of cash from their customers and then have all sorts
of potential liabilities to pay out. And so how if
(18:31):
you're taking you know, fifteen hundred dollars insurance premium from
the Lane family on their auto policies, you can take it.
You can invest it at the FED and get some interest.
You can go buy treasuries and get some interest. Or
if you can convince your board and your shareholders, you
can go buy a basket of you know, collaboralize loan obligations,
juice your return and boost your profits, and or offer
(18:56):
a lower premium to your customers. Charlie perfect on all
fronts until it blows up in your face.
Speaker 4 (19:02):
Charlie Munger has this quote that smart man go broke
from Ladies liquor and leverage and the leverage one.
Speaker 2 (19:07):
It's like, how often does this come up?
Speaker 4 (19:09):
Mike? This is clos. We did this before with cmos
and it's like the package of stuff. It's so eerily
reminiscent how history repeats itself where you get over your
skis and overbar and overextend and something blows up.
Speaker 2 (19:21):
That is the business cycle.
Speaker 3 (19:22):
Paul quick Break, Wall Street Watch coming up next.
Speaker 1 (19:40):
Like US on Facebook and follow us on Twitter at
TFFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
It's been a bumpy ride for markets to this point,
as investors way regional bank concerns. This comes after Zion's
ban Corps said it would take a large loss, accusing
some borrowers of fraud. Right now, the Dow is up
by about a quarter percent, or one hundred and twenty
six points. SMP five hundred is up a tenth of
(20:20):
a percent or eight points higher. NASDAK up a tenth
of a percent or twenty two points higher. Russell two
thousand is down about three tenths of one percent. Tenure
treasure yield is up four basis points at four point
zero one six percent, and crude oil mostly flat tipping lower,
trading a fifty seven dollars and thirty eight cents a barrel,
(20:41):
well after yesterday's ten percent plunge. Shares in Jeffries bouncing
back six percent today. The bank has recently faced questions
about its ties to the First Brand's bankruptcy. However, Oppenheimer
upgraded the stock to outperform, with firm said Jeffrey's exposure
to first brands is very limited. Meanwhile, another big financial name,
(21:02):
and American Express, beat third quarter expectations and raised its
full year guidance. The credit card company reported a jump
in profit and revenue where card holders spent more in
card fees grew. AMEX shares a rising almost five percent, Elsewhere,
shares in ozempic maker Novo Nordisk falling over three percent
(21:23):
after President Trump said the cost of the weight loss
drug could be one hundred and fifty dollars, or much
lower than it is now. Micron Technology down by about
one percent after Reuters reported that the chip maker would
exit the server chips business in China. Railroad operator CSX
is up two percent after it posted better than expected
(21:45):
third quarter earnings. In Oracle stock pulling back after yesterday's
rally by six percent today. Yesterday, Oracle confirmed a cloud
computing deal with Meta. I'm Tucker Silva, and that is
Wall Street Watch pull.
Speaker 3 (22:00):
Most Americans are falling behind and saving for retirement. I've
heard this story again before. But you do financial planning,
I would guess every day just about.
Speaker 2 (22:14):
So.
Speaker 3 (22:15):
You and I have both run into instances where we
are working with somebody on their financial plan and they're
approaching retirement and things don't work. So we always have
a bunch of levers to pull. What are the levers
that you pull if you are falling behind on putting
things together for retirement?
Speaker 2 (22:31):
One in for that bucket.
Speaker 4 (22:32):
One which is not the most appealing is you know,
you continue to work longer than you would have wanted to,
which isn't the first one that you want to start with.
Speaker 2 (22:39):
It's always a tough pill to swallow. Yeah, it is.
Speaker 3 (22:41):
Yeah.
Speaker 4 (22:41):
Otherwise, there are some instances where I'm working with clients
particularly what's so important about this is doing it before
it becomes an issue. You can kind of make the
parallel to Social Security trust, which is mentioned in this article.
It's you know, projected around on twenty thirty three. Gee,
it would be so smart if we took measures today
to try and you know, curb that potent issue. That's
a separate deal. We all know about that, but specific
(23:03):
to an individual out there, The sooner that you address
that shortfall, the easier it is to potentially resolve that
issue rather than saying, Gee, I'm sixty four or sixty
five years old, it's time to pony up and save more.
What oftentimes I'll look at with clients is, let's say
you get past the college tuition years for your kids
and you're starting to phase in, to call it your
(23:23):
late fifties early sixties. That is that point in time
where you can really turn on the saving switch. For
a lot of people. You're at the peak of your
earnings power from an income perspective, you don't have the
big liability of a tuition payment. That's the time to
start a gear up and get ready to go.
Speaker 2 (23:38):
Yeah, I'll be honest.
Speaker 3 (23:39):
Like the working extra and cutting expenses piece, they're the
most impactful ones you can do, but they are also
the toughest ones to get.
Speaker 2 (23:49):
Yeah, buy into.
Speaker 4 (23:50):
Thirty years of working your butt off for forty years
and then you have to cut expenses.
Speaker 3 (23:54):
You know, the one that gets underestimated. In my mind,
we're oftentimes talking to people who have been in stressful,
high power jobs for a long period of time, but
pulling off a few years of working for even a
third of what that person was pulling in before in
a very low.
Speaker 2 (24:11):
Stress type environment. It has a lot of impact it does.
Speaker 3 (24:16):
You know, That's one where I think people sometimes undervalue or,
as the author of this piece is puts in there,
there might be some embarrassment or shame in doing that.
Speaker 2 (24:25):
Type of work.
Speaker 3 (24:26):
And I guess I've seen it, and I'm not here
to judge psychology, but like I know people who have
gone from you know, working in a six figure job
to working part time at home depot and one really
enjoy the work a fair bit, and then two have
this bucket of money that they pull in that really
dephrase the need for so security or other things that
they're able to put off for longer. But I think,
(24:50):
as we frequently come back to from the Armstrong Advisory
Group on all of this, it's about knowing, Like that's
the first step in the process, because if you don't
know how much you can afford to spend or how
much you need to save every year to get to
a comfortable place, then it's all kind of a moot point, right.
You can't make these goals and objectives without having some
(25:12):
semblance an idea of how much you need to get to.
Speaker 4 (25:15):
Yeah, or where what is your baseline? I can't tell you,
Mike and you probably see the same thing. How many
people have no idea what they spend on a monthly basis.
I would say upwards of seventy or eighty percent of
people we meet with initially don't have an idea what
their baseline is.
Speaker 3 (25:29):
Right, So these are important considerations, and the fact of
the matter is, you know, you might have a really
firm grasp on the budget, you might have a really
firm grasp on the investment strategy and portfolio and what
your returns have been. Ultimately, though, to make your financial
plan successful, you have to have a sense for where
are you trying to get to and what it's going
(25:50):
to take to get there. How much can I spend,
how much do I need to make, how long do
I need to work? And what is my real number,
like what number do I need to get to before
I can comfortably hang it up? And it's different for
every household. If you're trying to answer that question, that
is what we do at the Armstrong Advisor Group day
in and day out, is help people assess what that
(26:11):
magic number is going to be to make their plans
work in retirement. Give us a call at eight hundred
three nine three for zero zero one. Let us talk
to you about how we do it. At the Armstrong
Advisory Group offices all throughout New England. You can book
an appointment or schedule a call by calling eight hundred
three nine three for zero zero one, or schedule a
(26:32):
call back at Armstrong Advisory dot com.
Speaker 1 (26:35):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 3 (26:50):
All right, we got one out of left field here, Paul.
I didn't think we were going to be talking about
this issue today, but auto industry panic about panicking about
another chip shortage. I thought that we were done with
chips shortages for the auto sector at least, but back
at the forefront, potentially here I was much more nervous
about tariffs and bankruptcies are parts suppliers. But now we
(27:11):
are back into the story of chip shortages for major
auto companies.
Speaker 2 (27:17):
Why are we talking about this today?
Speaker 4 (27:19):
The enjoying part of our job, MIC is it's something
new every day. Earlier this week, Chuck and I were
talking about cooking oil and soybean issues between China and
the US, and here we are back with the chip issues.
But what we're dealing with specifically here is Nexspiia, which
is a Dutch chip maker with about forty percent market
share and basic automotive chips. Their shipments have been halted
(27:42):
because the Dutch government took it over from its Chinese owner.
So basically, there was this company out there called Wintech Technology,
a Chinese company which is on the US trade blacklist.
The Dutch government came in and seized Nexspira, which is
kind of underneath that Wintech Technology, and took it back
over stating that it has to keep Europe from losing
(28:05):
its technological capabilities and its knowledge there. It deals with
some of the issues that have gone on with concerns
about exporting. You know, it bleeds into some of the
rare earth stuff that we've talked about too, where China
had stepped in and said, all right, you know what,
we're going to see some of these exports as a
result of this takeover.
Speaker 1 (28:26):
That they did.
Speaker 2 (28:27):
Raise your hand if you've ever heard of Nexperia before
to day, right.
Speaker 3 (28:34):
This is how sensitive these supply chains still are. There's
some Dutch company that no one here has ever heard
of that accounts for forty percent market share, and basic.
Speaker 2 (28:44):
Auto chips who knew? Who knew?
Speaker 3 (28:48):
Let's take a quick break when we come back. I
think that's enough for the auto industry for the moment.
Let's talk a little bit about oil because prices have
been on the move. A little bit of good news
for those of us at the pump. But what does
it mean for the overall economy?
Speaker 2 (29:03):
That's next. On the Financial Exchange.
Speaker 1 (29:05):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Like us on YouTube and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. Miss any of
the show. Catch up at your convenience by visiting Financial
Exchange show dot com and clicking the on demand icon,
where you'll find all of our interviews and full shows.
(29:28):
This is your home for the latest business and financial
news in New England and around the country. This is
the Financial Exchange Radio Network.
Speaker 2 (29:50):
Paul, it's still pretty cheap to fill up my cars.
Speaker 3 (29:52):
It's a national average of three dollars and five cents
a gallon. Looking across New England, here ains at three
oh three, New Hampshire at two ninety six, Mass at
three oh two, Connecticut at three yoh seven, Rhode Island
at two ninety six, and Vermont sitting at three dollars
and fourteen cents per gallond. Did I give, Yeah, I
(30:15):
give Connecticut. So loving the cheap gas prices, I'm excited to,
you know, pay a little bit less for home heating
oil this winter. But I I don't know, I'm a
little bit perked up about oil prices dropping below sixty
bucks a barrel. I mean, we're sitting right now, just
(30:36):
a FYI at fifty seven dollars thirty nine cents on
West Texas crude oil. Most analysts out there, and most
who look closely at the oil industry look at that
sixty dollars range as kind of the break even point
for drilling new wells and getting oil on the ground
in the United States.
Speaker 2 (30:55):
And so.
Speaker 3 (30:57):
You do wonder, okay, how much new exploration and drilling
is going to happen with oil sitting at these prices.
But moreover, what does it say about the global economy
to see oil prices sitting in the sixty dollars range.
To me, it doesn't spell fantastic news about you know,
if you have oil demand so low that it's only
able to garner fifty seven bucks a barrel, I don't know.
(31:20):
I'm not enthusiastic about what this might mean.
Speaker 4 (31:23):
Yeah, and it seems like this could potentially there isn't
really a near term fix for this. I mean, US
oil producers they notched a fresh output record of more
than thirteen and a half million barrels a day in July.
You've got the Saudi leg lead OPEC announcing that they're
going to boost production by one hundred and thirty seven
thousand barrels a day in November. So it seems like you.
Speaker 3 (31:43):
Got the massive oil fielding Guiana. Now that's pumping. So,
I mean, don't get me wrong, it's not only a
demand equation here. We do have more supply that's able
to be pumped.
Speaker 2 (31:54):
But yeah, to see see oil prices down here, I
don't know. To me.
Speaker 3 (32:01):
That industrial demand and all that stuff is not terribly
great at the moment.
Speaker 4 (32:07):
Probably the case, but it's with energy productions. It's just
the price can swing so quickly. Yes, it's hard to
read too much into it, but I would agree with you.
It does seem like industrial activities down a bit, and
maybe that's leading to some of these lower prices here.
Speaker 3 (32:19):
New York Times reporting that Delta and United are leaving
other airlines behind. So let's talk about how and why
and will it stick? I mean, the airline industry has
obviously become hyper concentrated at this point, in spite of
in spite of a few judges shooting down merger attempts.
(32:40):
What was it Jet Blue and Spirit that tried to
merge and now Spirits of course in bankruptcy, and who
knows what will happen with Jet Blue, but these two
are clearly standing out. I would toss American as kind
of a third contender in here as well, because they
basically mirror each other's business models. But what's been working
recently for these airlines compared to us.
Speaker 4 (33:00):
Really what it is is this shift to focus on
making the most profit per seat on the first class
and lounge premium seats experience. And I hate to keep
bringing this up. We hit it on often. I do
wonder if it's just focusing on the divergence and the
consumer that we've kind of tracked where the higher income
(33:21):
consumers are accounting for a heavy percentage of spending nationally.
And it seems like Delta and some of these in
American have been these airlines that have and United too
that have sort of shown this trend the most where
whether it's corporate business travel or first class seats, that
is where they're making tremendous margins MIC and it's leading
to profitability numbers that are really impressive for the airline sector,
(33:45):
which is a very tough business to execute in. And
it just seems like there's the haves and haves nots
both of airlines and just where the consumers are willing
to spend money. Like I just don't think you're seeing
as much demand for those discount airlines in those travelers
than you are from the first class travelers in Delta.
Speaker 2 (34:05):
United. Look.
Speaker 3 (34:06):
Airline travel is the It's probably my definition of discretionary item.
Yeah right, Like even for businesses, you do not have
to send your employees to go on an airline.
Speaker 2 (34:18):
You can tell them to do a zoom meeting. These days, it.
Speaker 3 (34:21):
Is the definition of discretionary spending is flights on airlines.
And so I do find what is happening there to
be intriguing, and it continues. Like you said, this divergence
we have been seeing of luxury right.
Speaker 2 (34:39):
Now is selling.
Speaker 3 (34:40):
Delta in their most recent earnings call, reported that premium
revenue increased by nine percent year over year. So that
is first class, is business class, it's you know, just
premium spending.
Speaker 2 (34:51):
In general.
Speaker 3 (34:53):
Main ticket revenue, main cabin ticket revenue was down four
percent year over year at Delta. Right that is a
star contrast. It spells right into what we've been talking
about of the top ten percent really keeping on the
spending and the others not doing so. And in some
ways it makes me think.
Speaker 2 (35:11):
You know, hey, will we see.
Speaker 3 (35:15):
Will we see that dramatically pull back if you see
an asset price pull back, and will the spirits and
the jet blues in the Southwest have their heyday at
that point? But I'm honestly not sure at this stage
because Delta and American and all these airlines have gotten
so good at segmenting their business and still offering really
cheap flights in their main cabins. You know, I don't
(35:39):
know if Delta does it, but American, I'm sure, has
a completely stripped down ticket where you don't get to
choose your seat, don't get to bring on a checked
bag and everything, And so they can compete on price
with spirit in ways that they just chose not to
in the past. And so even the case of let's say,
you know, markets fall apart and we have that per
(36:00):
of time where luxury spending pulls back, I'm just not
sure that the business is going to go to those
discounters like it used to.
Speaker 4 (36:07):
Yeah, just such a difficult business to execute it. And
I do worry about, like you said, it is such
discretionary spending that it could fade very quickly to from
these larger aircraft carriers that they don't continue to demand
these type of profits on those seats. But I don't
know how how would you make a counter argument that
(36:28):
the mid size airlines can really compete. I just don't
know what case stuff to make.
Speaker 3 (36:34):
Yeah, it's tough to By the way, this is not
just something that's isolated to the airline industry. Marriott also
reported earnings recently. What they found was their luxury segment
saw growth of four point one percent in the US
and Canada, where as their Select service and extended stay
so they're more discounted segment one and a half percent decline.
Speaker 2 (36:58):
So you're really seeing this.
Speaker 3 (37:00):
Across the board. And here's where I'll drive it all home.
Consumer spending generally used to be driven by wages. It
was driven by the wage that you have in your
current job, as well as new people getting jobs and
getting into the labor force, and that was what drove
consumer spending. There's this insinuation by this data that now
(37:23):
consumer spending is being driven by a wealthier, older population
who I would presume is more being driven by asset
prices and the wealth effect than they are by wages,
because I don't know a ton of seventy year olds
who are working. It's mainly, hey, I've got so security,
(37:43):
and look how big my portfolio has gotten. And I
went on zillo and look what my house is worth.
And that just reshapes things pretty dramatically. It just changes incentives.
It changes a whole lot of the structure of the
US economy. If consumerism is now still there but driven
by asset prices instead of income, I kind of have
(38:05):
to rethink a lot of things in my head about
how this whole structure works. We got to take a
quick break, but have a ton more to cover in
the second hour of the Financial Exchange.
Speaker 2 (38:13):
Stay tuned, we'll be right back folks.
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